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Airline earnings: IATA advocates for Pakistan to permit repatriation of $399 million

The International Air Transport Association, a global consortium representing airlines, has urged Pakistan to promptly release airline revenues currently being withheld in violation of international agreements.

In a statement, it was highlighted that airlines are facing significant challenges in repatriating over $720 million in revenues, with $399 million held in Pakistan and $323 million in Bangladesh.

Philip Goh, IATA’s Regional Vice President for Asia-Pacific, emphasized the critical importance of timely revenue repatriation for meeting dollar-denominated expenses like lease agreements, spare parts, overflight fees, and fuel.

Furthermore, Goh noted that delaying the repatriation process not only breaches international obligations outlined in bilateral agreements but also amplifies exchange rate risks for airlines.

“Pakistan and Bangladesh must promptly release the more than $720 million they are withholding to ensure airlines can continue providing vital air connectivity upon which both economies rely,” emphasized Goh.

The IATA’s statement underscores the challenge foreign entities encounter in repatriating profits from Pakistan, which has imposed restrictions on dollar outflows to stabilize its dwindling foreign exchange reserves. Currently, the State Bank of Pakistan holds reserves just under $8 billion.

Highlighting the risk to connectivity posed by blocked airline funds, the IATA, representing around 320 airlines accounting for 83% of global air traffic, urged Pakistan to streamline the cumbersome repatriation process. It pointed out that Pakistani airlines are burdened with providing an auditor’s certificate with each remittance, a requirement that can occur as frequently as twice a month, leading to increased operational costs in the country.

Furthermore, IATA mentioned that airlines operating in Pakistan must also secure a Tax Exemption Certificate from the Commissioner of Income Tax. However, the association argued that this requirement is unnecessary since airlines serving Pakistan are already covered by double taxation avoidance agreements, which further prolongs the process of fund repatriation.

“We understand the complexities governments face in strategically managing foreign currencies. Airlines operate on extremely thin profit margins. They must prioritize markets based on their confidence in being able to cover expenses with revenues remitted in a timely and efficient manner.

“The reduction in air connectivity hampers potential economic growth, foreign investments, and exports. Given the substantial sums involved in both markets, urgent solutions are imperative,” stressed Goh.

Pakistan’s $350 billion economy is grappling with a persistent balance of payment crisis, with approximately $24 billion due for repayment in debt and interest over the upcoming fiscal year. This amount is three times greater than the foreign currency reserves held by its central bank.

Additionally, Pakistan is in the process of pursuing a new, larger loan from the International Monetary Fund, following up on the Stand-By Arrangement established last year.

Islamabad aims to secure a loan spanning at least three years to bolster macroeconomic stability and implement long-overdue and challenging structural reforms. However, Aurangzeb has refrained from disclosing the specific amount the country is seeking.

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